Motorists are set to pay an extra coin to insure their vehicles after some insurance firms started raising premiums for the new year by up to 40 percent citing inflation.
A motorist who spoke to Nation.Africa said her annual comprehensive motor vehicle cover for 2023 has been raised from Sh13,000 to Sh44,000 for 2023 from Sh31,000 this year.
Other motor vehicle owners have taken to social media to voice their frustrations after they were slapped with higher premium rates to renew their annual insurance covers.
But a highly placed source in the industry, who did not wish to be named, said the high cost of business had compelled insurers to review premiums.
The cost of spare parts, he said, has increased due to rising prices of steel and other metals coupled with a rapidly weakening shilling that has raised the cost of imports.
“Each insurer has its reasons for increasing their premium rates. But what we have witnessed recently is a steep growth in the cost of motor vehicle repairs and spare parts,” said the source.
“Therefore, we are seeing insurers increasing premium prices to reflect the situation on the ground.”
The move by several insurers comes at a time the motor vehicle insurance segment has been growing steadily in recent years with motor insurance gross written premium growing by 10.26 percent from Sh44.74 billion in 2020 to Sh49.33 billion in 2021.
Despite the growth, however, motor insurance has been mired in losses for years, with motor private insurance recording a loss of Sh5.89 billion while motor commercial posted Sh2.98 billion losses last year.
This marked the seventh year running of underwriting losses in motor insurance, dating back to 2014, which is the last time the segment made profits amounting to Sh1.6 billion.
These persistent losses are a result of premium undercutting in an effort by insurers to reserve their market share, said the Association of Kenya Insurers (AKI) in a previous report.
Insurers had last year sought to set a minimum premium of Sh45,000 for vehicles valued under Sh1 million to reduce undercutting but the High Court quashed the move amid concerns that the move was in contravention of competition laws.
The insurance companies had also sought to exclude motor vehicles that are more than 12 years old or with a value of less than Sh600,000 from their comprehensive cover.
